Modi government is hopeful that higher estimated revenue flows in the second half of FY17 will help it meet fiscal targets. According to an ET Now report, the Finance Ministry will begin the H1 expenditure review from mid-September and expenditure rationalisation is expected after that. The channel’s report suggests that the government is likely to tighten its expenditure in the second half of the current financial year. OROP (One Rank One Pension) and 7th Pay Commission arrears are expected to burden the government’s fiscal math. 7th Pay Commission arrears of about Rs 20,000 crore to Rs 25,000 crore are to be paid in H1, the channel added. The government expects PSU buyback funds to flow in from of Q3 FY17 and is also betting on spectrum auctions to boost revenues.
Centre’s fiscal deficit for the first three months of FY17 was pushed to Rs 3.26 lakh crore on account of higher revenue expenditure resulting from front-loading of subsidy payments. This is 61.1 per cent of the full-year target of Rs 5.34 lakh crore. Capital expenditure was reported at Rs 48,996 crore or 19.8 per cent of the full-year target in the first quarter of this year as against Rs 58,609 crore or 24.3 per cent in the corresponding quarter last fiscal.
Meanwhile, the Medium Term Expenditure Framework Statement tabled by Finance Minister Arun Jaitley in the Rajya Sabha recently said that reducing fiscal deficit to 3.5% of GDP in 2016-17 is a challenge. This it said was due to the “huge burden” of implementation of Pay commission recommendations. “Keeping in view the challenge of reduction of the fiscal deficit by 0.4% of GDP in a difficult year in 2016-17 with substantial additional liabilities on pay revision, the Government is quite optimistic of fully achieving the fiscal deficit target of 3% by March 2018,” the statement said. The fiscal deficit targets for 2017-18 and 2018-19 have accordingly been projected at 3% of GDP, the statement added.